2023 (7) TMI 430 - AT - Central Excise

Recovery of the amount equal to 6% of sale value of Bagasse, Press mud, boiler ash and Sludge - Rule 6(3) of the Cenvat Credit Rules, 2004 alongwith interest and penalty - HELD THAT - An identical issue had arisen in the matter of PURNA SAHAKARI SAKHAR KARKHANA LTD. VERSUS COMMISSIONER OF CGST C. EXCISE, AURANGABAD 2022 (12) TMI 6 - CESTAT MUMBAI Mumbai in which this Tribunal allowed the appeal filed by the assessee therein - It was held that These are by-products only and merely emerge as waste or residue while manufacturing sugar and molasses from sugar cane. None of the by-products falls within the definition of manufacture and in its absence nothing can be demanded from the appellant. It is not the case anywhere that after the amendment on 1.3.2015 by-products/ waste/residue have been included in the definition of manufacture and therefore in my view the provisions of amended Rule 6(3) or Rule 6(2) ibid has no application and resultantly the demand raised by the revenue cannot sustain. The pressmud, bagasse, boiler ash and sludge which emerged as waste or byproduct, fall outside the purview of Rule 6 ibid. Accordingly the impugned order is set aside and the Appeal filed by the Appellant is allowed.

Summary

Issues involved:
The appeal challenges the order upholding the recovery of 6% of the sale value of certain by-products under Rule 6(3) of the Cenvat Credit Rules, 2004.

Issue 1: Liability for payment of 6% of sale value of exempted goods
The main issue is whether the appellant is liable to pay an amount equal to 6% of the sale value of Bagasse, press mud, boiler ash, and sludge generated during the manufacturing of sugar/molasses under Rule 6(3) of the Cenvat Credit Rules, 2004.

The appellants, as sugar and molasses manufacturers, generated by-products like bagasse, press mud, boiler ash, and sludge during manufacturing. The department alleged that the appellant availed cenvat credit on inputs used for both dutiable and exempted products, leading to a demand for payment under Rule 6(3) for the period April 2016 to June 2017. The Adjudicating Authority confirmed the demand, citing amendments to Rule 6(1) effective from March 1, 2015. The appeal was rejected by the Commissioner (Appeals) based on the same amendments.

Issue 2: Interpretation of Rule 6 in relation to by-products
The Tribunal considered the nature of the by-products, asserting that bagasse, press mud, and boiler ash are waste or residue and not manufactured goods. The Tribunal referred to a previous decision where it was held that such by-products fall outside the scope of Rule 6. The Tribunal emphasized that the by-products emerged as waste during the manufacturing process and did not involve a separate manufacturing activity. The Tribunal also highlighted that the circular dated 25.4.2016, which was relied upon by the authorities, was rescinded in view of a Supreme Court decision regarding the non-excisability of bagasse. Relying on the Supreme Court's ruling and previous Tribunal decisions, the Tribunal concluded that the by-products in question do not fall under Rule 6 and allowed the appeal.

In conclusion, the Tribunal set aside the impugned order and allowed the appeal, determining that the by-products, being waste or byproducts, do not come under the purview of Rule 6 of the Cenvat Credit Rules, 2004.